Question

Prelate Ltd. was organized on September 1, 2017 to buy and operate real estate properties. The shareholders started the company with a cash investment of $1,500,000. Prelate arranged a long-term loan with a local bank for $1,100,000 and purchased an office building for $2,100,000. During its fiscal year ended August 31, 2018 Prelate collected $500,000 in rent from tenants, paid $170,000 in cash for operating expenses, and paid $20,000 in cash dividends to its shareholders.

Required:a. Classify each of the cash flows described above as operating, investing, or financing.b. Organize the cash flows into a statement of cash flows.c. Explain what your statement of cash flows tells you that an income statement doesn’t.